Yesterday, I showed you how you can use spreads to generate cashflow with AVGO.
Because we were covering a period of almost 4 months, for the sake of saving time, the spreads I used as an example, expired roughly 30-40 days out.
Some folks from my Weekly Options Profits program, where we use weekly spreads to generate cashflow from different stocks asked “Which is better, selling spreads with expirations a week away or a month away?”
Well, for me the answer is easy. In Weekly Options Profits, we use spreads that only last 3 days — we always enter the trade on a Tuesday and they always expire by that Friday.
I just like the idea of being in a trade for such a short amount of time.
Of course, the longer the spread, the more it’s going to generate.
In our previous example, we were averaging about 35% for trades that lasted roughly 30-40 days.
When you’re only in a trade for 3 days, you’re going to get a lot less.
For example, in Weekly Options Profits, we get somewhere around 5-7% for being in the trade for 3 days. Sometimes well get really lucky and pick up 10%, but that’s a bit more rare.
On the whole, I think it comes down to your personal goals.
I like getting in and out of a trade quickly.
Look at the market this past week, it just shifted dramatically, with tech losing ground and other sectors picking up steam.
This week, in Weekly Options Profits, we traded NVDA, selling the 115 put and buying the 114 put, both expiring today.
With less than 2 hours left as I write this, those options are more likely than not going to expire out of the money, which means well close out another winner this week.
(Side note: This is another reason I love these credit spreads. It doesn’t matter if the stock goes up, sideways or a little bit down… I can still keep the full premium I collected when I entered the trade.)
But if I had entered this trade 3 weeks ago and I still had another week left till expiration, well you can see that it might not have worked out that way.
Selling weekly spreads just lets me have a little more control. Each week I get to see where the stock is before I enter a fresh trade.
For me, that counts for a lot.
Even if it means I have to check in on my trades one a week instead of once a month, I think its worth it.
But if you read yesterday’s example, you can see that with a properly trending stock, you can go months and months without having the stock drop significantly.
As I always recommend: If you’re getting started with these strategies, paper trade them first.
Watch how markets react… watch how long trends can continue even after traders are saying “it’s overbought” or “it’s gone too high”…
Watch how stocks can take little dips every so often without causing trouble for the spreads you have on.
Over time, you’ll develop a style that suits you. And then you’ll be able to answer the “weekly or monthly” question with the answer that’s right for you.
Trade well,
Jack Carter
P.S. I’m still sharing Summer’s Hottest Trending Stocks right here — plus the secret weapon that helps me find them!